Daily Home Renovation Tips

That was in our previous home.

When we moved the contract followed us to our present home.

Now, you will always pay a premium over the curent ’spot’ price in any kind of natural gas future contract. Why? It is because the company with whom you sign the contract needs to make a profit and needs to build in a cushion for the risk they take on should the price increase more than the price of the contract.

Sure, they themselves typically enter into the same type of contract with a natural gas supplier who also needs a cushion for their own risk.

Now, what are the details of what we were offered? Here they are for the 5 year natural gas contract we were offered by Direct Energy:

• 35.9 cents per cubic meter
• 37.9 cents per cubit meter if we wanted 2 cents to be added to the 1st price of 35.9 cents per cubic meter which would supposedly go to supporting someone’s environmental initiatives
• 37.9 cents per cubic meter in year 1, 36.9 cents in year 2, 35.9 cents in year 3, 34.9 cents in year 4 and 33.9 cents in year 5.

Wow.

The current residential price, as of this writing, of natural gas from Enbridge inc. is 23.5 cents per cubic meters.

Wow. That’s a premium of 12.4 cents per cubic meters (35.9 - 23.5) that Direct Energy is wants to charge us for locking in the price with them for 5 years.

When we signed with Direct Energy almost 5 years ago, the premium was only 2.84 cents per cubic meters  , the difference between our current contracted price of 30.9 cents per cubic meter and 28.06 cents per cubic meter, the spot price charged residential consumers by Enbridge Inc.

12.4 cents premium now vs 2.84 cents premium 5 years ago? Hmmmm.

The renewal offer we received in the mail contained additional information.

We can call them or sign the renewal form they sent us before August 4, 2009 to renew.

If we fail to advise them in writing (notice we can renew over the phone but not cancel over the phone) that we will not be renewing with Direct Energy, they can at their option automatically renew us for a one year contract at 39.9 cents per cubic meters. Geesh. Who do these guys think they are?

Tomorrow we look at the current competition.